Insurance Basics Explained

To begin with, insurance provides financial protection against a loss arising out of happening of an uncertain event. A person can avail this protection by paying premium to an insurance company.

A pool is created through contributions made by persons seeking to protect themselves from common risk. Premium is collected by insurance companies which also act as trustee to the pool. Any loss to the insured in case of happening of an uncertain event is paid out of this pool. And believe me, companies providing for example property insurance or mortgage insurance have a really great one!

Insurance works on the basic principle of risk-sharing. A great advantage of insurance is that it spreads the risk of a few people over a large group of people exposed to risk of similar type. 

Insurance is a contract between two parties whereby one party agrees to undertake the risk of another in exchange for consideration known as premium and promises to pay a fixed sum of money to the other party on happening of an uncertain event (death or illness in case of health or family insurance) or after the expiry of a certain period in case of life insurance or to indemnify the other party on happening of an uncertain event in case of general insurance.

The party bearing the risk is known as the 'insurer' or 'assurer' and the party whose risk is covered is known as the 'insured' or 'assured'.

The concept behind insurance is that a group of people exposed to similar risk come together and make contributions towards formation of a pool of funds. It doesn't mean, that if you're buying a mortgage insurance it'll lower your mortgage rates. It means that if you've bought an accident insurance and a motorcycle insurance and got crashed on it - you'll get a good compensation. Of course, you may never get your money back. But it's better to secure yourself buying a house insurance, for example, not to lose everything at once.And, i consider,it's better to buy an online insurance, where the insurance quote may be compared with other ones.